There are three simple but powerful questions which can transform our trading when we ask them of ourselves consistently over time.  They are powerful because they form the basis of mental flexibility and mental agility.  Wouldn’t you like to be mentally more resilient and deft?

The three questions can be asked anytime you are preparing for trading, executing, and managing trades, or reviewing your trading results — in other words, anytime you are engaged in a trading-related activity.  The three questions2 are:

Right now, in this trading moment,

  • Am I present?
  • Am I open to my thoughts and feelings?
  • Am I doing what really matters?

Let’s look at each question in more detail.  Table 1 provides a summary.

Am I Present?

In a recent study, psychologists surveyed thousands of people randomly throughout the day via a smart phone app to see if they were focused on what they were doing or thinking of something else.  No matter what people were doing (with one exception1), people’s minds wandered 47% of the time.  That’s like flipping a coin—half the time our attention is on-task; half the time it’s not — and that’s random! 

Asking yourself “Am I present?” is prompting you to notice whether you are engaged with what you are doing, paying full attention to your trade, for example.  If you are, that’s terrific.  Notice when you are present how much more able you are to handle events and how easily you respond when events change.  If you find you are thinking of something else, however, when you ask “Am I present?” notice you are not on-task.  If you are disengaged, only partially present, or operating on “autopilot,” you are not giving your full attention.  How can you trade effectively when your attention is elsewhere?  If you notice your mind has wandered off your trade or trading task, gently bring your attention back to what matters.

Am I Open to my Thoughts and Feelings?

This can be a tough one for some traders.  Asking, “Am I open?” is about noticing whether you are allowing your thoughts and feelings to flow through you as temporary mental events or whether you are hooked by and entangled with them.  We have thousands of thoughts and feelings every day.  They come and go on their own accord.  As we learned above, many thoughts and feelings have little to do with what we are actually doing.  Because we have tended to uncritically treat our thoughts and feelings as truthful, genuine, and compelling since childhood, we can easily become hooked by them.  When we treat thoughts and feelings as something more than they are, however, we lose our openness to them, can struggle to control them, and, paradoxically, become hijacked by them.  Let’s look at a common trading example to illustrate this crucial point …

We are in a well-planned, winning trade that pulls back a bit.  Despite the fact that our profit target is faraway, our mind urges, “Close this trade now and take profits.”  Although we may fight this thought, its power seems to grow.  Mounting tension and the jittery nervousness we feel over losing profits make this thought of closing the trade seem true, valid, and inescapable.  We are hijacked.

Closing the trade brings relief from the stress and some satisfaction at banking a small profit.  But what happens when the market continues in the anticipated direction?  Does our mind apologize for getting us out too early?  Not likely.  More likely it’s now chastising us for cutting the trade short!  Here’s a critical question: Which mind was right—the one telling us to get out of a winning trade or the one now berating us for doing exactly that?  Not being open to thoughts and feelings and believing them uncritically leads to being mentally and emotionally whipsawed and unskillful in our trading.

Learning to be open to thoughts and feelings — even the difficult ones — is a mental skill well worth developing.  When we are open to our thoughts, we accept them as merely thoughts, not something we have to struggle with or act on.  Openness gives us mental distance from our thoughts and feelings, keeping us from being hijacked and whipsawed by them.  When you notice that you aren’t open, acknowledge this and see if you can make room for them.  Mindfulness techniques work very well when practiced.  Learning to breathe into the feeling and noting, “I am having only a thought that I should cut this trade short” can change our perspective.  See the difference even a little more openness can make.

Am I Doing What Really Matters? 

When we ask this, we are asking, “Am I doing something meaningful, acting like the trader I want to be?”  If you are focused on the trading task at hand and acting congruent with the task, great!  Be sure to appreciate you are being the trader you desire.  If, however, you are not doing what really matters (such as cutting the well-planned trade short), take some time to assess what’s truly important in your trading — consider who you want to be and how you want to act as a trader.  Project yourself into the future: It’s your retirement dinner and colleagues are giving you a testimonial.  What will they say about you?  Will you be known as a trader who cut trades short or someone different?  Begin to deliberately connect your trading actions to who you want to be as a trader.  Do what really matters.

Table 1 Questions to Transform Your Trading

Question

Description

Suggestions

Am I Present?

Keep your attention on the trading task at hand.  No one can trade well when their mind is distracted.

When you notice your mind has wandered, simply return your focus back to the task at hand.  Mindfulness practice can create strong attentional abilities helping us maintain our focus on what matters, not on distracting mental chatter.

 

Am I Open to My Thoughts and Feelings

We have thousands of thoughts a day, and many occur randomly.  Not every thought is a true and accurate reflection of reality and we need not give every thought that status.  When open to thoughts and feelings we simply observe them as mental events that are temporary and may or may not be relevant to our trade.

Developing the skill of openness takes practice.  A simple exercise is to take 10 minutes and practice noticing your thoughts and feelings.  When a thought or feeling arises, e.g., “I’m hungry,” make a mental note, “I am having the feeling I am hungry.” This changes the thought or feeling from “I am” to “I am having a thought that I am.” 

 

Am I doing What Really Matters?

Are you taking actions that support your trade and yourself as a trader?  When uncomfortable feelings arise and we cut a winning trade short, we are acting in the service of our emotions (escaping them), not our trade.  It’s neither good for the trade nor for the trader.

 

Be clear on what you are all about as a trader.  How do you want to act?  A useful way to think about this is to consider an expert trader.  What qualities would the expert have and how would the expert behave? 

These three simple questions, “Am I present?” “Am I open?” and “Am I doing what really matters?” underlie mental flexibility and open the way for skillful and agile trading.  Make them a routine part of your trading and begin to see your trading be transformed.   

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To learn more about Dr. Gary Dayton, author of Trade Mindfully, please click here

Notes:

1 The one exception was making love.

2 Credit goes to Russ Harris, MD for nicely distilling a rich approach to psychology into these three essential questions.